…or perhaps it’s just me who needs a math lesson?
I know this is a bit of a long post, but if you have 2-3 minutes, I would really appreciate if you would please read on, then post your comments and let me know if I’m crazy…or if Verizon is. (Don’t worry, I’ve done all the math for you, I just need you to help me understand what Verizon Wireless is thinking!)
I tend to be a very loyal customer when I get service I like. A couple of examples:
- Until she retired, I used the same hair stylist for over 20 years.
- I’ve been eating at my favorite Chinese restaurant every chance I get since 1987.
- I’ve been a loyal Verizon Wireless customer since the day Verizon opened its doors for business in 2000, and was a loyal customer of their previous incarnation before that.
The only time I wasn’t a Verizon customer is when I moved to a rural Kansas location where they had zero service. So for two years I was a (not very impressed) T-Mobile customer. However, as soon as I found out Verizon finally had service in my area, I switched back immediately.
My average bill for the eight years I was on Verizon Wireless was around $100/month. So let’s start with the math:
$100 per month X 12 months X 8 years = $9,600 I gave to Verizon in the past.
In the many years I was a Verizon customer, I was a big evangelist for the brand. Their unlimited mobile to mobile plan prompted me to recommend Verizon to many of my clients, customers, and even family members. In fact, I particularly remember my dad being SOOO excited because switching his phone and his (then) girlfriends phone to Verizon saved him about $400/month in wireless costs. (They really liked each other…they wound up getting married!)
All told, I estimate I’ve brought Verizon a minimum of 25 new customers since I’ve been their customer. That’s a conservative estimate, but we’ll use it for now. Continuing to be conservative, let’s say those customers averaged $50/month in billing. More math:
25 customers X $50 per month X 12 months X 8 years = $120,000 in referred revenue I’ve brought to Verizon. WOW!
So that’s the past. Now let’s talk about the future.
I’ve continued to be happy with ALMOST every aspect of Verizon service. I now maintain two Blackberry data plans, so my monthly bill is about $160. Barring any drastic changes or moves, I had no plans to drop the service. So let’s say I would have been with Verizon another 10 years and do some more math:
$160 per month X 12 months X 10 years = $19,200
Finally, let’s assume I have the same influence in bringing them additional customers in the future.
That’s another $120,000 in future revenue.
So, here I am, a customer who is worth $28,800 in direct revenue, and $240,000 in referral revenue for a total of $268,800 lifetime value (LTV).
Here is where the confusion comes in…
Recently, the Verizon Wireless service levels (signal) at my house have deteriorated to the point that I cannot use my phone at home. It worked fine for the first 8-9 months I was back on Verizon, but now is virtually unusable. This is a BIG problem for a guy who works from his house.
In talking with Verizon Wireless, the said they are having “tower problems” due to their acquisition of Alltell earlier this year, and the drop in service coverage is “known” and “entirely their issue”.
Their solution? They want to sell me a $250 device that is basically a mini cell tower that plugs into my home internet access. Pretty cool device, and it would totally solve my problem. “But,” I asked, “why should I have to pay for this device when the problem is admittedly yours? My service worked fine before you screwed up something in your tower. Don’t you think you should just give me the device to fix your own problem”.
Their answer: “Nope, we don’t just give these away under any circumstance. If you don’t want to pay for it, then we recommend you drop our service”. WHAT??
By the way, I got this answer from both a customer service rep, AND the “Office of the President”. So that’s their final answer…“Buh bye” to me.
So here I am, planning to drop my Verizon service as they recommended. I’m currently researching T-Mobile and Sprint, getting ready to take my $268,800 in lifetime customer value to one of Verizon’s competitors.
But as a business person and marketing consultant, I’m completely baffled as to why a company would make a decision like this. So this is where you come in dear reader: Can YOU give me any logical scenario where a business would sacrifice $269,800 in revenue rather than simply take care of the customers’ needs for a measly 250 bucks?